Google Restructures Under “Alphabet” Umbrella – What It Means and Why It Makes Sense

Larry Page has announced that Google is restructuring into a new holding company named “Alphabet”.

Essentially, Google is being reorganised under a new umbrella named “Alphabet”, which includes Google as a wholly owned subsidiary, and all of the other products and services that Google has acquired and created over the years.

So what does this mean for the future of Google, and for the future of everyone who relies on Google services and products on a daily basis?

What’s this all about?

We did a lot of things that seemed crazy at the time. Many of those crazy things now have over a billion users, like Google Maps, YouTube, Chrome, and Android. And we haven’t stopped there. We are still trying to do things other people think are crazy but we are super excited about.

We’ve long believed that over time companies tend to get comfortable doing the same thing, just making incremental changes. But in the technology industry, where revolutionary ideas drive the next big growth areas, you need to be a bit uncomfortable to stay relevant.

Alphabet is the new holding company which includes all of Google’s current properties – whether it’s YouTube, Maps, or Google itself. Larry Page and Sergey Brin will now stand at the helm of Alphabet, as CEO and President respectively.

Sundar Pichai, the Senior Vice President of Google, is set to become the new CEO of Google itself. As he was touted to become the next Twitter CEO, this will be keeping him at Google for the time being.

Why is Google restructuring to Alphabet now?

Google has become far more than just a search engine. Google as a company has been dabbling in countless different businesses and industries, with sights set on various technologies and products to change how we live.

In essence, Larry Page and Sergey Brin have simply become far too ambitious in their vision to stand behind what is known as a search engine. Google is still a search engine first and foremost; and so it makes little sense that a search engine was creating self-driving cars, and glucose-sensing contact lenses to help prevent cancer. By creating an umbrella for all of these companies to exist under, it allows them to dabble in a number of different areas, and solve any of the world’s problems that they wish to.

Not only does this move mean Google can get involved in various different areas, it also allows these businesses to get stuff done faster, and make smarter moves on a regular basis. Not everything has to tie back to Google the search engine overall, and each business can work by themselves autonomously. Now that it isn’t tied directly to Google, each subsidiary can focus on creating even more ambitious products than ever before.

This will create stronger individual brands, which run independently. For instance, when Google’s self-driving cars come to fruition, they can come up with a new strong brand. Rather than a “Google Car” or “Google Self-Driving Cars”, it can be called something new.

YouTube has already cast-off the iron shackles of Google+. If Alphabet chose to acquire any other businesses, it means they will function and run mostly on their own, which is a big positive.

Essentially, Google are attempting to replicate the success of businesses such as General Electric, who diversified into countless areas and became a multinational conglomerate corporation. Instead of being known as “Google”, it’s “Alphabet”. No ties to online search, and the chance to start afresh and diversify however they see fit.

Why is it called Alphabet?

By calling the holding company Alphabet, as a collection of different companies, it represents how it will grow to offer everything from A to Z. Which, funnily enough, is also touted by Amazon, one of Google’s biggest rivals.

Larry Page said:

For Sergey and me this is a very exciting new chapter in the life of Google—the birth of Alphabet. We liked the name Alphabet because it means a collection of letters that represent language, one of humanity’s most important innovations, and is the core of how we index with Google search! We also like that it means alpha‑bet (Alpha is investment return above benchmark), which we strive for! I should add that we are not intending for this to be a big consumer brand with related products—the whole point is that Alphabet companies should have independence and develop their own brands.

Below are just a few of the companies which fit into the new idea of an “Alphabet”, but I’m sure Google will be filling in the gaps soon enough:

B – Boston Dynamics

C – Calico

D – Driverless cars

F – Fiber

G – Google

L – Life Sciences

N- Nest

S – Sidewalk Labs

V – Ventures

X – X Labs

Google as a brand is worth over $65 billion, so Alphabet is not set to takeover the Google brand itself. It merely exists to allow new brands to flourish. It’s also worth noting that Google/Alphabet has a new typeface, and possibly new branding overall on the horizon.

What it means for Google and other businesses

Google have reached a point that any brand would love. The brand has reached a point where it is synonymous with what it does – searching. As a word, Google has simply become too linked with the search function.

Most people will say “let me Google that” or “I just Googled…” on a daily basis – which shows just how strong the brand has become, but also how ingrained the term is within our culture. So much so, people will say they have “Googled” more than they have “searched”. Not many people say “let me Bing that” quite yet.

And that is why Google needed the name change – in order for it to branch out from search. Otherwise, consumers may get confused why a search engine is producing unrelated products, such as self-driving cars. Now that it’s called Alphabet, which is purely a collection of companies, they can do whatever they want, and branch out into any number of things. It doesn’t have to tie into the Google ecosystem of search any longer.

It also means that any failed products won’t be linked back to Google, and won’t reflect on their main brand. Alphabet allows for a form of partition between Google and other products which could fail in the future, and Google has had a lot of cases like this in the past. Anyone remember Google Buzz?

Google experienced a lot of bad press thanks to Google+, which they do not wish to happen again. Despite the fact the social network is still a powerful medium for certain audiences, it simply never managed to match the success of Facebook. Because of this, the fact Google is directly linked with it damages the brand as a whole. This leaves two open ends for social networks: Alphabet could launch a new network with a new brand without damaging Google if it fails, or they could purchase a social network (Twitter, most probably) and not have to integrate it and plaster Google branding all over it. It would still exist with Twitter, but it would allow for them to profit from it and integrate it into the wider range of products and services.

This also means that Google can acquire whatever they want, and not have to have a reason related to search. Google Ventures and Google Capital are now able to invest in companies with a great amount of potential, and then bring them into Alphabet at a later stage. Bran stated in the blog post that the team were excited to begin “investing at the scale of the opportunities and resources we see”. It also means that subsidies can acquire other businesses themselves, such as Nest acquiring Dropcam.

Financially, it makes sense as all the subsidies can show their own revenue growths, and not be lost as part of the overall Google brand. If Nest begins to grow and creates a huge amount of revenue, people will be able to see this, rather than it becoming a small part of bigger statistics in the Google family.

Competition

Other big names such as Apple and Facebook are further diversifying. Apple is also creating their own car, and Facebook is looking to launch their own internet service and virtual reality gear through the Oculus Rift. Google already had some damage by Google Glass not taking off as a consumer product, and have backtracked to rethink the strategy. For future ventures, such as VR failing as a whole for all companies, then the Google brand won’t get damaged as a result.

Google and Amazon don’t quite get along, competing on many different fronts, but otherwise benefit from Google advertising linking through to the ecommerce store. Whilst Google has Google Shopping and a buy button coming to search results, it still mostly relies on other sites to finish the transaction. So it’s a tricky relationship overall.

This is where Alphabet comes in. As Google Ventures invested in Jet, which is a member’s only retail site, this could show Google’s logic. If Alphabet were to bring Jet under the umbrella, Jet remains how it is, and Alphabet get the benefits of this. Google can continue to work on advertising with Amazon, without having to compete directly by creating a Google ecommerce experience. Google/Alphabet can continue to purchasing any companies they find promising, without fear of competing against themselves and losing money on other fronts.

What will it mean for the public?

Overall, there’s not too much change for the public at this stage. Google will maintain control over consumer-facing services such as ads, Photos, Gmail, the Play Store, YouTube, Android, and others. So for most people, the relationship with Google will remain similar, through searches or apps.

However, this could spark the deintegration of Google into all existing products. Similar to how YouTube no longer needs Google+ for an account, it could impact other Google/Alphabet products or services. This means we could see big brands emerge in their own rights as part of Alphabet, and are no longer forced into the Google ecosystem of apps and systems.

Essentially from now on if you refer to Google, you are specifically talking about the search engine, and the direct services which lead from there. If you are talking about the company as a whole, Alphabet is now the term for all of these ventures that Google has become famous for.

Because Google/Alphabet are going to be diversifying, it means the upcoming “moonshot” products Google are developing could spin-off and become even more adventurous. And many of these companies are set to have a dramatic impact on everyday life – if they are a success. Some of the most exciting ventures include:

Google X

Google X is home to a number of exciting and forward-thinking divisions. This includes:

Sidewalk Labs is a Google-backed innovation company dedicated to improving city life. This includes attempting to improve and innovate on:

Creating sustainable living

Curbing pollution

Curbing excessive energy use

Transportation within urban environments

Calico

Calico is an independent research and development biotech company established by Google, which study diseases of the aging, and hope to combat diseases that come along with it.

Calico develops therapies for:

Age-related diseases

Neurodegeneration

Cancer

If these ventures are now allowed more freedom, and now gain more momentum thanks to the fact they can work independently without relation to a search engine, then this could be a monumental move for the future development of life-improving technologies.

Google hasn’t just been a search engine for a long time. Google has been a company that works in many different areas, from online advertising, online video, the advancement of robotics and artificial intelligence, healthcare, and the advancement of society as a whole.

Whilst the benefits of this could be amazing, it’s also a kind of scary situation where Google could become an unstoppable force which controls every aspect of our lives. But it seems overall, the benefits outweigh the negatives, and for the meantime, it should be a welcome move.

Larry Page and Sergey Brin have made a very bold move indeed; but this could spell out the next few decades for the company, and also signal the start of a new era for Google, and Alphabet.